Business Ethics and

Social Responsibility
 Defining Business
Ethics

1. Understanding Ethics
2. Defining Business Ethics
We begin by exploring how people live their
lives according to a standard of right or
wrong behavior.

Where do people look for guidance in deciding

what is right or wrong or good or bad?

Once they have developed a personal set of

moral standards or ethical principles, how do
people then interact with other members of
their community or society as a whole who
may or may not share the same ethical
principles.
With a basic understanding of ethics, we can
then examine the concept of business
ethics, where employees face the dilemma
of balancing their own moral standards with
those of the company they work for and the
supervisor or manager to whom they report
on a daily basis.

We examine the question of whether the

business world should be viewed as an
artificial environment where the rules by
which you choose to live your own life dont
necessarily apply.
 What is Ethics ?
The manner by which we try to live our
lives according to a standard of right
or wrong behavior - in both how we
think and behave toward others and
how would we like them to think and
behave toward us.

Ethics is about how we meet the

challenge of doing the right thing when
that will cost more than we want to pay.
 Business Ethics

Ethics is a part of decision making

at all levels of work and
management
Just as important as functional areas
of business
Deals with questions of whether
practices are acceptable
No universally accepted approach for
resolving issues

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 Business Ethics
Defined
Comprises organizational principles, values,
and norms that may originate from
individuals, organizational statements, or
from the legal system that primarily guide
individual and group behavior in business
Ethical decisions occur when
accepted rules no longer serve and
decision makers must weigh values
and reach a judgment
Values and judgments play a critical role when
we make ethical decisions
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7
 Business Ethics
Defined
Morals: Refer to a persons personal
philosophies about what is right or wrong
Morals are personal and singular

Principles: Specific and pervasive

boundaries for behavior that should not
be violated
Human rights, freedom of speech and justice
Values: Enduring beliefs and ideals that
are socially enforced
Teamwork, trust and integrity
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 8
 A Crisis in Business Ethics

Nearly half of employees observe

misconduct in the workplace
After the financial crisis, business
decisions and activities have come
under scrutiny
The financial sector has not regained
stakeholder trust

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 Americans Trust in Business Sectors
(% of respondents who say they trust the following business categories)

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 Role of Organizational
Ethics in Performance

Cengage Learning
2015
2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 11
 Ethics Contributes to
Employee Commitment
Commitment comes from employees
who are invested in the organization
and willing to make personal sacrifices
for the organization
The more company dedication to ethics,
the greater the employee dedication
Concerns include a safe work
environment, competitive salaries and
benefits packages, and fulfillment of
contractual obligations

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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12
 Ethics Contributes to
Investor Loyalty
Investors are increasingly interested in
a companys reputation and recognize
how:
ethical culture provides a foundation
for efficiency, productivity, and
profitability
negative publicity, lawsuits, and
fines threaten a companys long-
term viability
Gaining investors trust and confidence
is vital to sustaining financial stability
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 13
 Ethics Contributes to
Customer Satisfaction
Customer satisfaction is an important factor
in a successful business strategy
Companies seen to be socially responsible
increase customer trust and satisfaction
Trust is essential for long-term customer
relationships
A strong organizational ethical climate
places customers interests first
Ethical conduct toward customers builds a
strong competitive position shown to
positively affect performance and innovation

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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14
 Ethics Contributes to
Profits
Companies need profits in order to
meet their responsibilities
Corporate concern for ethical conduct
is being integrated with strategic
planning
Maximizing profitability
Ethics has moved from being a
compliance standard to becoming an
integral part of achieving a
competitive advantage
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 15
 Specific Issues

Misuse of company resources

Abusive behavior
Harassment
Accounting fraud
Conflicts of interest
Defective products
Bribery
Employee theft

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 The Reasons for Studying Business Ethics

Having good individual values/morals

is not enough to stop ethical
misconduct
Ethics training helps provide
collective agreement in diverse
organizations
Business ethics decisions can be
complicated
Studying business ethics helps
identify ethical issues to key
stakeholders
2013 Cengage Learning. All Rights Reserved. 17
 A Timeline of Ethical and Socially
Responsible Concerns
1960s 1970s 1980s 1990s 2000s
Environment Employee Bribes and Sweatshops and Cybercrime
al issues militancy illegal unsafe working
contracting conditions in third-
prices world countries
Civil rights Human Influence Rising corporate Financial
issues rights issues peddling liability for persona misconduct
damages (for
Source:
Source: Adapted
Adapted from
from Business
Business example, cigarette
companies)
Increasing Covering up Deceptive Financial Global
employee- rather than advertising mismanagement issues,
employer correcting and fraud Chinese
tension issues product
safety
Changing Disadvantag Financial Organizational Sustainabilit
work ethic ed fraud (for ethical misconduct y
consumers example,
savings and
loan
scandal)
Ethics Timeline, Ethics Resource Center, http://www.ethics.org/resources/business-ethics-timeline.asp (accessed May 27, 2009). Copyright
RisingCenter
2006, Ethics Resource drug Transparency
(ERC). Used Intellectual
with permission of the ERC, 1747 Pennsylvania Ave. N.W., Suite 400, Washington, DC, 2006, www.ethics.org

use issues property

2013 Cengage Learning. All Rights Reserved. 18
What is ethics?
Ethics is the branch of philosophy
that focuses on morality and the way
in which moral principles are applied
to everyday life. Ethics has to do
with fundamental questions such as
What is fair? What is just?
What is the right thing to do in this
situation? Ethics involves an active
process of applying values, which
may range from religious principles
to customs and traditions.
What is business ethics?
Business ethics focuses on what
constitutes right or wrong behavior in
the world of business. Corporate
business executives have a
responsibility to their shareholders
and employees to make decisions
that will help their business make a
profit. But in doing so,
businesspeople also have a
responsibility to the public and
themselves to maintain ethical
 Although ethics provides moral guidelines,
individuals must apply these guidelines in
making decisions. Ethics that applies to
business (business ethics) is not a
separate theory of ethics; rather, it is an
application of ethics to business situations.
Although all people have ethical
responsibilities, higher ethical standards
are imposed upon professionals who serve
as social models, such as physicians,
attorneys, and businesspeople.
The Relationship Between Law and
Ethics
The law is an expression of the ethical
beliefs of our society.
Law and ethics are not the same thing.
The question, Is an act legal? is different
from the question, Is an act ethical? The
law cannot codify all ethical requirements.
Therefore, an action might be unethical,
yet not necessarily illegal. For example, it
might be unethical to lie to your family,
but it is not necessary illegal.
 Similarly, just because an act is illegal does
not necessarily mean it is immoral. Rosa
Parks was acting illegally when she refused
to give up her seat on the bus to a white
male, but that does not necessarily mean she
was acting unethically. Should an individual
obey the law even if it would be unethical to
do so? Under the theory of civil disobedience
espoused by Martin Luther King, Mahatma
Ghandi and others, an immoral law deserves
to be disobeyed. Can you think of any
examples of acts that would be illegal, yet
arguably ethical?
 Understanding Right and
Moral standards areWrong
principles based on religious,
cultural, or philosophical beliefs by which
judgments are made about good or bad behavior.
These beliefs can come from different sources:
Friends.
Family.
Ethnic background.
Religion.
School.
Media (television, radio, newspaper, magazines, and the
internet).
Personal role models and mentors.
 How Should I live ?
You do not acquire your personal
moral standards in the same way that
you learn the alphabet. Standards of
ethical behavior are absorbed by
observing the examples (both positive
and negative) set by everyone around
you parents, family members,
friends, peers, and neighbors.
 The value of A Value

When individuals share similar standards in a community,

we can use the terms values and value system.

The terms morals and values often used to mean the

same thing a set of personal principles by which you
aim to live your life. When you try to formalize those
principles into a code of behavior then you are seen to be
adopting a Value System.

Just as the word value is used to denote the worth of an

item, a persons values can be said to have a specific
worth for them. That worth can be expressed in two
ways;
1. An intrinsic value by which a value is a
good thing in itself and is pursued for its
own sake, whether anything good comes
from that pursuit or not. For example,
happiness, health, and self-respect can
all be said to have intrinsic value.

2. An instrumental value by which the

pursuit of one value is a good way to
reach another value. For example,
money is valued for what it can buy
rather than for itself.
 Value Conflict
It is this gray area that makes the study of ethics
so complex. We would like to believe that there are
clearly defined rules of right and wrong. However,
it is more likely that situations will arise that will
require exceptions to those rules. For example:

Lying is wrong but what if you were lying to

protect the life of a loved one?
Stealing is wrong but what if you were stealing
food for a starving child?
Killing is wrong but what if you had to kill
someone in self-defense to protect your own life?
 Ethics Means to Others

1. Simple Truth - Doing the right

thing.
2. Personal integrity - personal
character.
3. Rules of appropriate individual
behavior.
4. Rules of appropriate behavior for
a community or society.
 The Golden Rule

Treat others as you would like to be treated

The danger with the Golden Rule is that not

everyone thinks like you, acts like you, or believes in
the same principles that you do.

So to live your life on the assumption that your

pursuit of an ethical ideal will match others ethical
ideal could get you into trouble.
 Ethical Theories
Is about how we should go about living an
ethical life.

Ethical theories can be divided into three

categories

1. Virtue Ethics.

What sort of person would I like to become, and how

do I go about becoming that person?
2. Ethics for the Greater Good (Utilitarianism)

Focus on the greatest good for the greatest number of

people.
we must think beyond our own interests to the
interests of those we lead and serve, and the
interests of communities and the world. We must
take a long-term view, keeping in mind the broad
impact of our day-to-day decisions.

3. Universal Ethics.

There are certain and universal principles that should

apply to all ethical judgments. such as the
Declaration of Human Rights
 Ethical Relativism
Its not always easy to choose from the previous
theories, and it becomes clear that there is no
truly comprehensive theory of ethics, only a
choice that is made based on your personal
value system.

Therefore, many people choose the idea of

ethical relativism, whereby the traditions of their
society, their personal opinions and the
circumstances of the present moment define
their ethical principles.

Implies some degree of flexibility

 Ethical Dilemmas
The basic assumption of ethical theory is that you as
an individual or community are in control of all the
factors that influence the choices that you make.

In reality, your ethical principles are most likely to be

tested when you face a situation in which there is no
obvious right or wrong decision but rather a right or
right answer.

Such situations are referred to as ethical dilemmas.

Any idealized set of principles or standards
inevitably faces some form of challenge. For
ethical theories, that challenge takes the form
of a dilemma in which the decision you must
take requires you to make a right choice
knowing full well that you are:
- Leaving an equally right choice undone.
- Likely to suffer something bad as a result of
that choice.
- Contradicting a personal ethical principles in
making that choice.
- Abandoning an ethical value of your
community or society in making that choice.
 Resolving Ethical
Dilemmaswho will be
1) Analyze the consequences:
helped by what you do? Who will be
harmed? What kind of benefits and harm are
we talking about?
2) Analyze the actions: Consider all the options
from a different perspective, without
thinking about the consequences. How do
the actions measure up against moral
principles like honesty, fairness, equality,
respecting the dignity of other.
3) Make a decision: take both parts of your
analysis into account, and make a decision.
Example #2
A secretary who has worked for your
corporation for fifteen years is
involved in a car accident in which
she permanently loses the use of her
right hand. Thus, she can no longer
effectively type, file, or perform
many of the other functions that she
previously had performed and that
are included in her job description.
 Your corporation has a very tight
budget and does not have sufficient
funds to pay for an additional
secretary without reallocating budget
items. The injured secretary has
been very loyal to your corporation,
and you have been very satisfied
with her work and dedication. She
wants to stay at her job.
 Moreover, she does not believe that
she could find other employment at
this time. Should your corporation
fire her, lay her off with
compensation, or find a way to retain
her?